Fire Insurance: Are You Protected?
You may never need to use the fire provisions of your homeowner's insurance. But if you do, you can avoid unpleasant policy surprises by reviewing your coverage today
After you've had a fire is no time to learn that you own an inadequate insurance policy. Maintaining insurance isn't difficult, though, if you start with one simple rule, says Dan Hattaway, homeowners program manager at State Farm Insurance. "It's important that people look at insurance similar to the way they look at repainting their house," says Hattaway. "The policy you bought five years ago may not be adequate today, and a substantial number of people in the U.S. are probably underinsured." Here are some basic tips for understanding and using fire insurance:
The predominant challenge for people filing a claim is documentation of contents. Tim Wagner, Nebraska insurance director and chair of the Property & Casualty Committee at the National Association of Insurance Carriers, recommends people videotape their home and valuables and store it somewhere it will be safe from a fire's destruction—maybe with a family member in another town or in a safe-deposit box.
Have a new appraisal done with each renovation or addition to the home. "If you gutted the kitchen and got rid of the lime-green cabinets and put in new stainless steel appliances, that's when you need to be talking to your agent and making sure that you still have the proper coverage," says Hattaway, not just because the renovations increased the value of the home, but because there are likely new items that need to be added to the policy. "The same for adding a home office."
If you haven't done renovations, re-appraise your home every three years to account for market changes that may alter the cost of your insurance. The most important thing to realize today is that the housing boom has put a strain on the supply of building materials like cement and wood. That increases the cost of rebuilding a burned home, and if insurance has not been upgraded to meet the market conditions, you may not be entirely covered.
In an older home, learn what ordinances your town has related to partially damaged homes. In some cases, Hattaway says, a homeowner whose home suffers 40% damage may be required by law to retrofit the entire premise to meet current building codes—even the areas not impacted by the fire. There are insurance policies that will cover those extra costs—but you have to know the law and ask an agent.
Outdated electrical equipment could impact insurability. Have an electrical inspector examine older electrical systems for necessary upgrades and work with an agent to come up with a policy arrangement. The insurer may allow a grace period for more-costly upgrades if the equipment is slightly below standards, but hazardous electrical infrastructure may prompt insurers to deny coverage.